Government awaiting response to energy sector prior actions

The government is now awaiting a response from the lender institutions on its finalized proposals for energy-sector prior actions needed as part of the bailout agreement. The Greek proposals were delivered to officials in Brussels a number of days ago, according to energypress sources.

“We have sent our proposals and the answers are now pending,” an environment and energy ministry source told energypress.

It remains unclear whether all the plans will be adopted at this stage, to what extent, and how much they satisfy lender expectations. Certain officials involved in the negotiations have not ruled out the need for significant changes to a number of the proposals, without specifying any further.

At this stage, any predictions would be groundless. The only certainty is that prior actions concerning VAT revisions in private-sector education and action on non-performing loans will be examined at today’s Euro-working group as part of the effort to release a 2-billion euro sub-tranche of bailout money for Greece. The energy-sector matters, regarded as technical issues, will not be a key subject on today’s agenda.

Greece has requested, and appears to have received, a deadline extension from lenders until mid-November to complete negotiations on a plan to reduce main power utility PPC’s dominant market share through the adoption of NOME-type auctions. These will offer all electricity wholesalers access to the utility’s low-cost lignite-fired electricity production. Energy minister Panos Skourletis requested the extension last Thursday at a meeting with creditor representatives in Athens, citing a one-month delay to the NOME plan negotiations.

According to ministry sources, the lenders seem to have accepted Greece’s request to skip the short-term objective of reducing PPC’s market share by 25 percent until 2018 and instead focus on the long-term objective of reducing the utility’s market share to below 50 percent by 2020. PPC holds a 96 percent of the country’s electricity market at present.

Legislative procedures will need to be ratified to implement the NOME plan. An initial package of between 300 to 400 MW is expected to be offered through the auctions, to test market demand.

As for Greece’s temporary CAT plan – envisaged as a lead-up to a fixed mechanism – to compensate electricity producers for output in 2015, lenders appear to have considered it a form of state aid, according to an update from ministry sources following last Thursday’s meeting. However, negotiations on the permanent CAT mechanism appear to be making solid progress. The entire month of November may be required to complete this plan.

On another front, public consultation procedures were launched last Friday for the reintroduction of a Variable Cost Recovery Mechanism, locally acroymed MAMK, to prevent certain power stations from operating below cost by helping cover their start-up costs whenever they are called into action to help meet the grid’s needs.

Also, a ministerial decision is soon expected to be issued on the “disruption management” plan, to enable energy cost savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by IPTO, the power grid operator. As has been reported, this plan’s cost will greatly burden the renewable energy sources (RES) sector.

As for industrial sector electricity tariffs, PPC is believed to be preparing a plan to replace the 20 percent discount offered until now to the sector but abolished as a result of bailout demands.

On the privatization plan for IPTO, the power grid operator, Greek officials have proposed an alternative plan that entails transferring the operator’s fixed assets to a new company in which the state will hold a 51 percent majority stake. This company will not be supervised by the energy ministry but one of the other ministries, possibly the finance ministry, according to the Greek plan, based on models applied in other European markets.